Hochul set to unveil $233B budget
Spending plan calls for no tax increases
ALBANY — Gov. Kathy Hochul is scheduled to release a $233 billion executive budget on Tuesday that her administration said will resolve a multi-billion-dollar deficit but also include another roughly $2 billion for a migrant crisis that has no end in sight.
State Budget Director Blake Washington said the budget proposal would not increase personal income or business taxes.
“The way we solve for the budget gap is use of a little bit upside … on our revenue forecast,” Washington said. “We took some reductions in Medicaid but the state’s Medicaid program is still growing by $3 billion, or 11 percent.”
But challenges with declining enrollment in schools and the cost of Medicaid continue to present challenges for the state.
“I think that the challenge with Medicaid and school aid… is just demographics,” Washington said. “We have an aging population, and we have decreased enrollment in public schools and in our colleges and universities. … So, you look at both of those, you look at the shifts and where people are, and you have to sort of tailor your investments around that.”
For the second year, Hochul is also proposing roughly $2 billion be allocated to help pay for sheltering and other services for nearly 150,000 migrants, most of whom have arrived in New York City in the past 18 months.
“Between the two years, we’re already at $3.8 billion in new and unanticipated spending related to the migrant crisis,” Washington said. “Much of it goes to the city of New York for reimbursement for provisionary care.”
But Washington cautioned that it’s not sustainable for New York to continue providing that level of funding for migrants. He said that’s why Hochul and New York City Mayor Eric Adams have urged the White House and Congress to fix the nation’s immigration system and stem the flow of migrants coming across the border.
“Clearly … it’s the governor’s view and it’s the mayor’s view, too (that) this is not a sustainable path that the state of New York can stay on,” Washington said. “This is not something that we can continue to do, and that’s why she’s gone to the White House, she’s made pleas to Congress … because what’s occurring today is obviously a humanitarian crisis.”
He said the executive budget treats the migrant crisis as a “one-time action,” although he acknowledged “we’re in the second year of it.”
The state’s slow rollout of legalized marijuana sales has also created fiscal stress and Washington said calling that effort disappointing “is an understatement.” New York legalized marijuana nearly three years ago and has struggled to establish a bustling retail market, in part, because of provisions in the 2021 law that placed restrictions on licensing requirements to achieve what state officials have said are important social equity objectives. Those provisions also triggered lawsuits that further exacerbated the problems with getting the legal market going.
Cannabis industry observers have noted that in the first four months of last year — after the state’s first retail shop opened in December 2022 in New York City — the state had collected nearly $17 million in tax revenues from cannabis sales. Under the law that legalized the drug, roughly 40 percent of that revenue is supposed to be redirected to communities most impacted by prior marijuana enforcement.
But New York has struggled to keep pace with the tax revenues generated in other states that legalized marijuana and the retail industry has been severely damaged by a bustling underground of unlicensed cannabis stores. In Illinois, where recreational marijuana sales became legal in January 2020, the state saw a 50 percent increase in taxes collected from that industry between 2021 and 2022, when it collected $443.3 million.
Illinois, which does not have the same “social equity” requirements as New York, mandates that 25 percent of its tax revenue from cannabis sales “must support communities that are economically distressed, experience high rates of violence, and have been disproportionately impacted by drug criminalization.” That state’s
“We’re always concerned about outmigration.”
State Budget Director Blake Washington
disbursements to local governments increased from $82.8 million in 2021 to $146.2 million last year.
Division of Budget officials said they had projected $70 million in tax revenue from cannabis sales last year — an estimate that fell far short when less than $20 million was collected. This year, they’re hoping that number will increase to $158 million as more stores are opening and the state is stepping up its enforcement efforts against illicit shops.
“There’s just a general frustration around the illicit market, and trying to help the people who are trying to do it honestly has been a real challenge for the governor,” Washington said. “And so there will be some money in the budget to help with entax forcement.”
Since 2020, New York has also led the nation in population decline and many Republicans have asserted that New York’s high taxes and increased regulations for businesses have driven that exodus. The state also has experienced a 6 percent decline in public school enrollment — a reduction of about 157,000 students — from the 2019-20 to 202223 school years, the largest percent decrease of any state that has reported the data.
“We’re always concerned about outmigration,” Washington said. “We always want to make the state of New York a place that people live in, put down their roots and grow a family. I think if you look at the last 30 years, outmigration is a part of life in the state of New York. … As a result, when we look at this, we say, well, what can we do to … staunch the bleeding. … We want to make sure that we don’t raise taxes… (and) that we give people opportunity for the next job, and this budget has some good investments.”
The budget director said investing in companies like Micron, increasing the minimum wage and “to not keep piling on unsustainable levels of spending or unsustainable regulations on businesses” are the types of initiatives that are being undertaken to try and keep New Yorkers from leaving for other states.